SAN MARCOS — Developers, homeowners and businesses in San Marcos will face increased costs related to construction, permitting and public facility impacts after the City Council adopted comprehensive changes to several fees this week.
The changes adopted Tuesday to the city’s public facility fees, user fees and in-lieu housing fees come after months of studies and outreach to developers and residents. Since some of these fees have not undergone a comprehensive update in nearly 25 years, staff said it was necessary to start from the ground up.
“Recognizing that it’s been a bit of time since our last update, we wanted to be thoughtful about how we approached this,” said Development Services Director Isaac Etchamendy. “So what we started with was really looking at this from scratch. We wanted to make sure that rather than revisiting outdated studies and trying to update them, we just took a fresh look at the city.”
Fee changes will take effect in March. However, projects submitted prior to this date or that are already being processed will be exempt from the increases to in-lieu and public facility fees under a two-year grace period.
The city will conduct additional outreach to developers and the larger community about the changes over the coming months.
In-lieu fees
Under the city’s inclusionary housing ordinance, all residential developments must make 15% of the proposed units affordable or pay an in-lieu fee to the city to go toward other affordable housing developments.
Since 2000, the city has charged a flat rate of $9,300 for its affordable housing in-lieu fee. Now, the city will charge a rate of $15 per square foot in each proposed development.
The $15/square foot in-lieu fee is well below the allowable maximum of $25/square foot, which city staff worried would disincentivize development. It is also lower than the rates in most neighboring North County cities, where fees range from $16 in Carlsbad to $34 per square foot in Del Mar. (Escondido is the exception, as it currently charges $0.)
“We wanted the fees to meet the needs to develop affordable housing while not overburdening development and potentially negatively impacting or slowing development,” said Housing and Neighborhood Services Manager Sylvia Daniels.
In-lieu fees have been instrumental in creating affordable housing in San Marcos, supporting the development of 3,308 deed-restricted units over the last 20 years, according to the city. Earlier this year, the City Council also amended an ordinance to apply inclusionary housing requirements to rental developments rather than just for-sale projects, doubling the potential for these fees.
Mayor Rebecca Jones applauded San Marcos’ performance in the affordable housing sphere.
“We’re crushing it in the affordable housing compared to our sister cities,” Jones said.
All projects submitted to the city after March 5 will be subject to the new fee, with the two-year grace period in place for other projects. Staff said this grace period will hopefully prevent in-progress projects from being withdrawn due to a massive change in fees midstream, as many developers budget for in-lieu fees early on in the process.
While in-lieu fees are important to creating affordable housing, some areas of the city require developers to meet 15% affordability without the option for a fee. This is in place in the city’s Creek District and University District, also known as North City, where significant growth is projected over the coming years.
Public facility fees
The City Council also made changes to its public facility fees — also known as impact fees — which charge developers for the capital costs associated with growth. Fees are calculated based on the anticipated extra demands that new developments will place on facilities such as streets, transportation and parks.
The new structure sets fees based on six new facility categories — transportation; parks, trails and recreation; fire and EMS; advanced planning; habitat conservation; and storm drainage.
Single-family and multifamily residential developments will pay a total impact fee of $12.45 and $14.10 per square foot, respectively. Commercial developments will pay $20.18/square foot, office developments $18.72/square foot, and industrial developments $12.34/square foot.
These changes increase public facility fees for single-family residential developments but decrease them overall for multifamily developments. However, the city said the difference is made up with the in-lieu fee for the latter.
When setting these fees, staff said they had to take into account that developers are also facing public facility fees from other agencies, such as Vallecitos Water District. Because some other agencies’ fees are already high, the city had to keep theirs lower to prevent overburdening developers.
“So, we don’t collect as much because others are collecting so much,” City Councilmember Sharon Jenkins said.
User fees
When it comes to user fees, which are charged for services like permit and plan reviews, the city currently charges well below what it costs staff to perform many of its services, Etchamendy said.
The City Council agreed to increase around half of its fees to better align with staff time costs. The largest increases affected building and planning services processed through the Development Services Department.
Some of the more significant increases are for processing large-scale development applications. For example, the cost of processing a subdivision map will increase from $2,690 to $14,700; services for a site development plan will increase from $2,470 to $17,600; and processing a specific plan will increase from $2,860 to $24,500.
Business licenses will see an additional fee ranging from $16 to $154, depending on the type of business.
For homeowners seeking permits and plan approvals for single-family housing development, fees will be around 10 times higher — increasing from a base of around $679 to $6,781 for a 2,500-square-foot home.
However, city staff said the increased user fees for single-family residential and commercial development are still lower than the average of neighboring cities. Jones said she did not want to make fees so high that it would be infeasible for homeowners to improve their property.
“I also want to make sure we’re remaining a little bit lower when it comes to folks in our community improving their properties. I don’t want us to be overcharging, where they feel like, okay, now I don’t want to invest in my home,” Jones said.
San Marcos also added a new $2,854 user fee for accessory dwelling unit permits.
